The Oriental Insurance Company Ltd.

Background
The Oriental Insurance Company Ltd was incorporated at Mumbai, erstwhile Bombay on 12th
September 1947. The Company was a wholly owned subsidiary of the Oriental Government Security
Life Assurance Company Ltd and was formed to carry out General Insurance business. It was a
subsidiary of Life Insurance Corporation of India (LIC) from 1956 to 1973 ( till the General Insurance
Business was nationalized in the country). All shares of our company held by the General Insurance
Corporation of India have been transferred to Central Government in 2003.
The Company is a pioneer in system efficiency for smooth and orderly conduct of the business. The
strength of OICL lies in its highly trained and motivated work force that covers various disciplines
and has vast expertise. Oriental has expertise in designing special insurance covers for large projects
like power plants, petrochemical, steel and chemical plants. The company has developed new
products to cater to the needs of both the urban and rural population of India. With a technically
qualified and competent team of professionals at its helm the company has pledged to render the best
customer service.
Oriental Insurance made a modest beginning with a first year premium of Rs.99,946 in 1950. Service
to clients was the first goal of the Company and achievement thereof was helped by the strong
traditions built up overtime.
Current Market Position
ORIENTAL with its head Office at New Delhi has 30 Regional Offices and nearly 1800+ operating
Offices in various cities of the country. The Company has overseas operations in Nepal, Kuwait and
Dubai. The Company has a total strength of around 14,000+ employees. From less than a lakh at
inception, the Gross Premium went up to Rs.58 crores in 1973 and during 2013-14 the figure stood at
a mammoth Rs. 7282.54 crores. The Company's Gross Direct Premium Income in India during the
year 2013-14 (Audited) was Rs.7127.84 crores and the Premium Income outside India was Rs.154.70
crores. The Gross Direct Premium in India & abroad showed a growth of 8.07%. The Net Premium
Income (Domestic and Foreign), on the other hand grew by 15.08% to Rs. 6381.47 crores in 2013-14.
The Oriental Insurance Company has been enjoying the highest rating from leading Indian credit
rating agencies CRISIL and ICRA. The Company has also been rated as B++(Very Good) by AM
Best, an international rating agency. Oriental's diverse product portfolio has been specially designed
to cater to the needs of consumers in India. General insurance plans developed in the best interests of
customers have been a consistent effort from the side of the company to maintain its presence as one
of the foremost choice for the best insurance products available. Affordable pricing and ease of policy
renewal have been the key focus areas of Oriental over the past few years.
The company's offshore operations in Nepal, Dubai and Kuwait yielded a Gross Direct Premium of
Rs. 154.70crores during the year 2013-14 as against Rs 182.56 crores during the previous year. The
net premium on foreign operations stood at Rs. 139.73 crores as against this, the Net Incurred Claims
during this year in respect of foreign operations were Rs.110.57 crores at 79.10%. The market share of
Oriental declined to 10.09 in 2013-14 from 10.41 in the previous year although the contribution of
outside India premium to the total premium works out to be 2.12 per cent in 2013-14, marginally
lower than 2.75 per cent in 2012-13.

While the Indian general insurance industry has evolved significantly over the past decade or so, the
insurance penetration and insurance density levels are significantly lower than the developed as well
as comparable developing countries. The under-penetration is driven by lack of overall financial
awareness, lack of understanding of general insurance products, low perceived benefits, and
propensity to purchase insurance based on reactive drivers such as insistence by financers and
statutory requirements. Oriental plans to open 300 extension counters in unrepresented areas and
micro offices in Tier II and Tier III towns to increase their retail business strength and improve the
insurance density in such areas.
Insurance Product Portfolio
The various insurance product types available are given below:
Health Insurance
Motor Policies
Individuals/Family
Personal Accident
Professionals
Business/Office/Traders/Multi-peril
Engineering/Industry
Motor Vehicle -- Private/Commercial
Agriculture/Sericulture/Poultry
Animals/Birds
Aviation
Marine
Source: http://www.orientalinsurance.org.in/rural-insurance-policies.jsp
A few of the most widely sold and most useful general insurance policies by OICL are:1. Motor Policies
2. Electronic Equipment Insurance Policy
3. Householders Insurance Policy
4. Kissan Package Insurance
5. Motor Cycle Package Policy
With online policy buying and renewal facility now available at Oriental, customers are finding it easy
to check the details regarding policies and decide on the suitable choice on their own. The decision
earlier was limited to the help of an agent, however the traditional system is still very much functional
for the company.

Rural Insurance Policies

Bhagyasree Child Welfare Policy
Gramin Accident Insurance
Cattle Insurance
Janata Personal Accident Policy
Cycle Rickshaw Insurance Policy
Khalihan Insurance Package Policy
Dog Insurance
Kissan Agricultural Pumpset Insurance
Insurance of Fish in Ponds
Kissan Package Insurance Policy
Poultry Insurance
Rabbit Insurance
Plantation/Horticulture Insurance
Rajrajeshwari Mahila Kalyan Bima Yojna
Sericulture (silkworm) Insurance
Tea Plantation Insurance
Source: http://www.orientalinsurance.org.in/rural-insurance-policies.jsp
One of the most focused areas of the company remains rural and micro insurance products to cater to
requirements of rural public. The mentioned policies give a mix of products for the customers to
choose from depending on their needs as individuals or small business units.
Financial Analysis
Investments and Investment Income Ratio
With the upturn in the world economic scenario, investment in mutual fund portfolio yielded profits as
well as combination of other secondary market trades resulted in profits on sale of investments of
913.29 crore. The market value of total investments stood at 18429.52 crores this year and the book
value went up from the last year to 10584.69 crore this year. The company reduced the non dividend
paying portfolio and also restructured loans/debentures/preference capital.
The investment income ratio (investment income divided by net premiums earned) takes investment
income into account, and is used in the calculation of the overall operating ratio.
Net premium earned = 595397 lakh
Investment Income(including interest/dividend/rent and profit on sale of investments)= 42601 lakh
Investment Income ratio = 595397/42601 = 13.9
Profitability Ratios
The miscellaneous portfolio registered the highest growth rate of 10.14% in India growing from gross
direct premium of 5161.36 crore in 2012-13 to 5684.81 crore in 2013-14. Overall the fire portfolio
and miscellaneous portfolio both grew by approximately 8% over the premium generated last year
within India and abroad. The motor portfolio in the miscellaneous section has been the key driver this
year with a total premium 2491.17 crores out of which Motor OD premium contributed 1206.51 crore
and Motor TP premium 1286.44 crores. Thus motor contributed 37% of the total premium of the
company. The tie ups with manufacturers and dealers on all India level as well as locally in states
were maintained. In 2013, two additions to this portfolio were made by a financier level tie up with
Mahindra and Mahindra and ICAI Institute of Chartered Accountants India for providing Motor
insurance to its more than 2 lac members at a special discounted rate.
Net Profit Ratio = Net Profit After Tax/Gross Premium(within and outside India)
= 46029 lakhs/103978 lakhs
= 0.44

Incurred Claims Ratio

= Claims incurred/Net Premium Earned

= 511102/595397 = 85.84%
This ratio increased from 81.54% in 2012-13 to 85.84% in 2013-14, hence showing the number of
claims incurred increased. The net profit before tax also fell from 794.74 crore in 2012-13 to 660.73
crore this year.
Combined Ratio
{A measure of profitability used by an insurance company to indicate how well it is performing in its
daily operations. The combined ratio is calculated by taking the sum of incurred losses and expenses
and then dividing them by earned premium. The ratio is typically expressed as a percentage. A ratio
below 100% indicates that the company is making underwriting profit while a ratio above 100%
means that it is paying out more money in claims that it is receiving from premiums. Even if the
combined ratio is above 100%, a company can potentially still make a profit, because the ratio does
not include the income received from investments. The combined ratio does not take into account
investment income. This is an important item to note, since a portion of dividends will be invested in
equities, bonds, and other securities.
Combined ratio = (incurred loses + expenses)/earned premium
The combined ratio after policyholder dividends ratio measures the money flowing out of an
insurance company in the form of dividends, expenses, and losses. It is the sum of the loss ratio (loss
and loss-adjustment ratio divided by net premiums earned), expense ratio (underwriting expenses
divided by net premiums written), and policyholder dividend ratio.
The components of the ratio each tell a story, and should be examined both together and separately in
order to understand what is driving the insurer to be profitable or unprofitable. Dividends are
generated from the premiums generated from the insurers underwriting activities. The loss and lossadjustment ratio demonstrates how much it costs the insurer to offer one dollar of protection. The
expense ratio shows how expensive it is to generate new business, since it takes into account
commissions, salaries, overhead, benefits, and operating costs.}We can include some part of this
explanation in the analysis methodology part.
Combined Ratio = 5.49% of net premium earned (Source: Annual Report 2012-13)
Solvency Analysis
{The solvency ratio of an insurance company is the size of its capital relative to all the risk it has
taken, which is all liabilities subtracted from total assets. In other words, solvency is a measurement
of how much the company has in assets versus how much it owes. It is a basic measure of how
financially sound an insurer is and its ability to pay claims. It helps investors measure the companys
ability to meet its obligations and is similar to the capital adequacy ratio of banks.
Worth mentioning here is that solvency and liquidity are not the same. Liquidity is a measure of a
firms ability to pay short-term debt, while solvency is the ability to pay all debt including long-term
debt. It is an indicator of the firms long-term survival.
In India, insurers were required to maintain a minimum solvency ratio of 1.50. Insurance players
whose solvency ratios were dangerously close to this minimum level were closely watched by the

IRDA. However, as per the draft exposure issued by IRDA in February 2013, it was proposed that the
insurance companies be required to maintain a solvency ratio of 1.45 from fiscal 2013-14. a higher
solvency ratio is definitely good for the policyholder as this gives him a sense of comfort that the
liabilities are backed by assets more than the mandatory limit set by the IRDA. But it could also be
the case that in the short run, a particular company has garnered additional investment assets or
accumulated profits which have still not been put to use. And as the number of policy holders
increases, this will change.} We can include this in the introduction part or where we are mentioning
the relevance of the analysis.
Solvency ratio = net assets/ net premium written
Solvency Ratio increased from 1.59 in December 2013 to 1.64 in March 2014.
(Source: IRDA handbook)
Net premium written is different from net premium earned. The amount of premiums customers are
required to pay for insurance policies written during the year is the net premium written. This
contrasts with premium earned which is the amount of premiums that a company has earned by
providing insurance against various risks during the year. It may be measured gross (before deduction
of reinsurance costs) or net (after reinsurance costs). It is a measure of sales.
Policyholder Dividend Ratio
The ratio of dividends to policyholders to net premiums earned. The policyholder dividend ratio is a
measurement of the profitability of an insurance company or the overall insurance industry, and is
examined alongside the operating ratio.
The policyholder dividend ratio measures the money flowing out of an insurance company in the form
of dividends. Dividends are generated from the premiums generated from the insurers underwriting
activities, and in the case of the dividend ratio only premiums earned are taken into account. This is
because premiums that an insurer obtains through underwriting activities are treated as a liability until
part of the contracts duration has elapsed. As the contract approaches its end date, more and more of
the premium is considered earned.
The policyholder dividend ratio is used to calculate the combined ratio, which measures the
underwriting profitability of the insurer. The combined ratio is the sum of the loss ratio (loss and lossadjustment ratio divided by net premiums earned), expense ratio (underwriting expenses divided by
net premiums written), and policyholder dividend ratio. The ratio is typically expressed as a
percentage. If the combined ratio is under 100%, the insurer is said to be profitable from its
underwriting activities. This is because the ratio represents the costs associated with generating an
insurers business. A ratio of over 100% indicates an operating loss.
The policyholder dividend ratio, like the combined ratio, does not take into account investment
income. This is an important item to note, since a portion of dividends will be invested in equities,
bonds, and other securities. The investment income ratio i.e. investment income divided by net
premiums earned, takes investment income into account, and is used in the calculation of the overall
operating ratio. When analyzing an insurers overall operating ratio it is important to understand
which components affect the resulting value.
Policyholder dividend ratio = dividend provision/net earned premium

= 10800/595397 = 0.0181
Net Retention Ratio, Underwriting Expenses Ratio and many other can be calculated to
compare as mentioned in a sample balance sheet below.